Alisa Lawler, Vice President of Marketing and Business Development with Multipli Credit Union, says many employees ask their human resources director about borrowing money from their 401(k) plan. Lawler days this is a bad idea and there are several solutions that may help with the problem. “One of the primary reasons that you shouldn’t borrow from your 401(k) is it is for your retirement,” says Lawler. “In this day and age when many people are not saving enough money for their retirement, the last thing you want to do is borrow or rob from that early.” This is sponsored content.
- A common problem that we find when we're talking to the different employee groups that we serve is a lot of HR directors have employees that will come to them and will ask about robbing or borrowing from their 401K. We would like to provide to you a couple of scenarios of why this is a bad idea and then provide to you solutions that may be a better idea for that employee.
- My name is Alisa Lawler, I'm with Multipli Credit Union. I'm their VP of marketing and business development. One of the primary reasons that you shouldn't borrow from your 401K is it is for your retirement. In this day and age, when many people are not saving enough money for their retirement, the last thing you want to do is borrow or rob from that early. That is meant to be a long-term investment, so it is there at the end of your work stint, so you have that so you can actually enjoy retirement.
- When you borrow from it, it is not growing, and that money does not have the opportunity to compound, and then in some instances, you're not able to contribute to that money while you're borrowing until it's fully paid back.
- Probably one of the biggest jeopardies of borrowing from your 401K is that if you were to lose your job or no longer be employed with that employer, your loan will come due, sometimes immediately or very quickly and that full amount will have to be paid at the time of termination of employment.
- The credit union has a lot of options that we could help individuals with. The biggest thing is for them to come talk to us. We need to understand their situation. We may be able to help them with savings. We may be able to help them by consolidating some of their expenses. We may be able to provide them a new loan that can actually benefit them and fill that need that they're looking to fill instead of actually taking those funds from their 401K.
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